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How Businesses Can Limit Their Collection Accounts

By Sabrina Winters

In these trying economic times, many are going to be in the unfortunate position of not being able to pay on their debts. Ultimately, business owners may find many of their accounts heading towards collections.  As a business owner, there are ways in which you can prevent your business from being affected or at the very least, limit your risk. 

I recently attended a seminar regarding Collections and found the information that was provided to be too valuable not to pass along to you.  Thank you to Attorney Douglas J. Tate of Newitt & Bruny in Charlotte, North Carolina for the information. 

1.  Do not sell on credit;

2.  When taking credit applications make certain to collect the following information:

• name
• address
• telephone number or numbers
• fax number
• email address
• website address
• type of business (LLC, Inc., sole proprietor)
• state where the business is registered
• employer identification number (EIN) or Federal Tax ID number
• business license
• the names of each person who is permitted to make purchases for that company
• credit references
• signature of Authorized Person

3.   Verify all information provided to you on the credit application;

4.  Give a reasonable credit limit – do not over extend your allowable limits;

5.  Provide specific written credit terms;

6.  Obtain personal liability as well as corporate liability;

Stay on top of your accounts; do not let your accounts get too far behind. If they cannot pay one month, you need to assume they cannot pay month two, three or four.  By having the proper information at the beginning of your relationships with your clients, you will be in a much better position to avoid accounts going to collections.   

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